Travel trade magazine HOSTELTUR have just published their ranking of Spanish retail travel agency chains by turnover. I think the order remains more or less the same as previous years with Viajes El Corte Inglés still on top despite an estimated 7% drop in sales. Vibo Viajes, the retail arm of the fallen giant Orizonia was in third place in their first and last year as Vibo (previously Viajes Iberia) so in the ranking for 2013 most of the sales from Vibo will be split between Barceló and Viajes Halcón who have been taking on many of the old Vibo outlets.
Overall all these big chains reduced their sales by an average of 9% from 2011 to 2012. Seeing the performance by group it is clear that the biggest decrease has been in vacational travel as the chain’s with a higher proportion of corporate travel clients (Carlson Wagonlits and Barceló) have suffered the smallest decreases (2%) whilst the popular leisure and package tour retail specialist such as Halcón (-15%) o Viajes Eroski (-12%) have been the hardest hit.
Back in 2008 I was mainly marketing, short-haul European destinations to the Spanish outbound market. They had the money and they had the market (about 90% of travel from Spain was to Europe and still today Europe accounts for 85% of the outbound market). When the black clouds were first seen looming over Spain’s economy the European destinations were the first to drop everything and run for shelter. In just one year the same number of my client destinations invested just over one million euros less in marketing activities in Spain and this is illustrative of how the market changed almost overnight.
Several things coincided:
1.Spain as a source-market was obviously in trouble
2.The European destinations themselves were suffering their own economic problems and budget cuts
3.European destinations were selling less and less through tour operators and travel agencies and more directly to the consumer online. Thus there was less scope for co-marketing campaigns to share costs.
Media spend by short-haul destinations all but disappeared overnight. Latin American destinations have however continued to invest in promotion as Spain continues to be a significant source market for them (albeit more because of historic, cultural, commercial and family ties than “Tourism” with a capital T).
To get an idea of the competitive climate for these Latin American destination in the Spanish outbound market, it is interesting to look at which Latin American destinations are investing in media, how much they are spending and what they are buying. As we are now working for two national tourist boards and one airline in the region I asked a friend at Iris Media (a media planning agency with lots of tourism clients) to do some competitive analysis. To get the full analysis you have to be either my client or that of Iris Media but I would like to share some of the basic data (itself from Infoadex) as a general eye-opener.
The first thing that strikes me is that the overall investment is still remarkably low. A total of just 692,386€ was spent on advertising by the seven main players in the region, (we didn’t include Caribbean or Mexico as these are subject of a different analysis). Even more remarkable is that Peru accounts for over half the total investment (349,000€) from the region.
Coincidentally, just last week I had the great pleasure of meeting PromPeru’s director, Mªdel Carmen de Reparaz at the Marktur Forum event in Buenos Aires. I was there to explain to Latin American destinations how to do effective PR on a shoestring and looked on in admiration (and envy!), as Mª del Carmen presented the successful past campaigns (including an ambitious co-marketing campaign with Viajes el Corte Inglés) and the spectacular new cinema commercial for Perú. Where do they get the money from? Well they levy a 15$ charge on every foreign tourist entering the country and this money goes into PromPeru’s marketing budget, the more international visitors they get, the more they have to invest and so the spiral grows. It certainly seems to be working because last year, despite the recession Peru managed to increase tourism from Spain by 11%. So whilst Chile has a total marketing budget of just 2 million dollars for the whole world, Peru has 80 million.
It is also interesting to see how destinations are investing their budgets. Together, the seven countries we looked at split their budgets among the different media as follows:
Our research has shown that the most cost-effective combination for destination promotion to the Spanish tourist is online + outdoor and yet a whopping 56% of the budget still goes to daily newspapers (print). The explanation for this is that there are still many destinations that invest only in co-marketing campaigns with local Tour Operators. I am a huge fam of co-marketing in principle as it supports image advertising with a tactical call to action and it multiplies the destinations marketing budget. The only problem is that all-too-often the local tour operators are responsible for doing the media plan and they choose the media where they have the best deal (and not necessarily the best media for the job) and traditionally the daily newspapers have been the most generous with their bulk-purchase discounts to tour operators. Anyway this is the subject for future post so for now I’ll just mention that Colombia seem to have the richest and most creative mix of media and last year they made a huge impact on the market.
I am proud and delighted to say that the Ministry of Tourism of Ecuador has recently appointed my company (Interface Tourism Group) as its representative in Europe. From our office here in Madrid, we will coordinate all the promotion of Ecuador in all six of its priority markets in Europe: Spain, Germany, UK, France, Netherlands and Sweden.
Last week I had meetings with three of the main tour operators in the market. All received me with the usual smiles and hugs and cheerful banter about family and football, but when I turned the conversation to business with “so, how’s Easter?” all stopped smiling and answered with the same… “Un desastre”.
There is a saying in Spanish that literally translated comes to something like “the skinny dog gets all the fleas” which sort of sums up the tour operators’ resignation as they write off the whole Easter holiday sales to concentrate on working a miracle for the summer. The skinny dog is the Spanish outbound market which is a little undernourished and neglected but still good-natured, loyal and strong-willed. The fleas are the irritating clouds of bad luck that make matters worse:
1. First the general state of the Spanish economy and unemployment that is now mining the confidence of even the most optimistic middle class families. Although there are still many families that are not directly affected by unemployment of salary cuts, it is increasingly rare to find someone without a child, uncle, in-law, etc. who has financial difficulties. Spain is a society where families help each other out in times of need so many are sacrificing holidays to lend to relatives. Those that are not actually helping out are becoming increasingly cautious thinking that it could happen to them next.
2. The Orizonia bankruptcy, right in the main period for sales for Easter has had a huge effect. First it distracted the whole outbound industry from the task of selling as the big players were running around frenetically in a race against time and against each other like doctors fighting over the healthiest organs for transplanting before the victim has even passed away. Retail agents were more worried about their future than selling holidays and consumers completely distrusted any tour operator package as the TV broadcast images of stranded travelers and angry consumers demanding their deposits back from closed travel agencies.
3. Iberia have been striking on and off over the last month causing cancellations and nobody can guarantee that they won’t cause disruption and chaos over Easter.
4. Easter is very early this year and the weather has been unusually wet and grey. Unlike northern European markets such as UK or Germany where the colder and wetter the winter the more people book holidays to guarantee some summer sun, in Spain people only start to think about travel or holidays when the spring starts. And it still hasn’t started!
All the above has also affected the domestic travel market (just today the hotel associations announced a drop in 25% in Easter hotel bookings in Spain). So it looks like the Semana Santa (Holy week) will recover much of its traditional catholic austerity as many will stay home and join the solemn (and slightly depressing) processions cross-bearing, self-flegelating penitents paying for their excesses of the past years of opulence and praying for a bit of luck (or at least for the bloody fleas to go away).
For those of us in the trade we can at least look forward to better sales in the summer as some will be spending the money they saved by staying home at Easter.
Spanish market insight
Carrie Davidson, Director of Market Management, Spain and Portugal, Expedia Lodging Partner Services provides insight into Spanish market travel trends
The Spanish travel market in general has experienced a noticeable shift from offline to online travel booking channels over the past several years and has seen an increase in mobile and tablet use, especially for last minute holidays. Travel industry experts like Phocuswright expect this trend will become increasingly prevalent going forward as more travellers around the globe become more familiar with making travel arrangements online, via desktop and mobile devices. Spain is the 4th country within the European Community with the highest mobile penetration after Sweden, Finland and Denmark. Hotel bookings via mobile applications in Spain have increased by 146.7% in summer 2012 compared with the previous year according to Offerum. Read the rest of this entry »
It is not easy to keep optimistic about the immediate future of the Spanish Outbound travel market when on the same day the country’s main airline is on strike canceling thousands of outbound flights and collapsing the main airports and the country’s largest tour operation holding is filing for bankruptcy.
Scenes of Iberia employees fighting riot police in front of terrified tourists in airport terminals share airtime on the same evening news with scenes of Spanish tourists stranded in the Caribbean by Orbest (Orizonia’s airline) or soon to be married couples lining up outside Vibo Viajes (Orizonia’s retail operation) demanding their deposits back from their dream honeymoon not come true. Most heartbreaking for me today however was footage of people I know, people from whom I have learned much about this business, people I like and respect leaving the head office of Orizonia with heads hung low and the look of both resignation and diffiance of a bull who has fought bravely and proudly in the ring against the inevitable end. Almost 5000 families will be directly affected by the demise of Orizonia which today seems as inexplicable as it was just a few weeks ago avoidable.
When José Hidalgo president of the Globalia group signed the agreement to buy Orizonia and immediately injected 15 million € to pay, amongst other debts, the last two months’ salaries of Orizonia’s staff we all breathed a sign of relief because we could see light at the end of a dark and twisted tunnel. There was just one small technical obstacle between Orizonia and a bright horizon and that was the approval of the Comisión Nacional de Competencia (Spanish Monopolies Commission) to Globalia’s offer. “Surely” I said at the time “the government of the country with the highest unemployment in Europe would not be so daft as to risk another 5000 jobs by not approving an emergency merger”…well once again bureaucracy and ineptitude have proven stronger than reason or logic and the situation has again completely surprised us all.
On Friday the CNC said they needed more time (around two months !) to analyze the operation. This to me is as hard to imagine as it would be for a heart surgeon to say he needs his patient to stay bleeding on the operating table while he does the paperwork for the transplant and makes sure the patient has private insurance. Time is something that Orizonia just doesn’t have and something José Hidalgo has said back in December that he cannot give them.
The poor employees that have worked so hard with such passion and professionalism to build one of the biggest companies in the Spanish Outbound tourism business have been let down by their senior management, by the company’s venture capitalist owners and now by the government.
I suspect that Viajes el Corte Inglés and Globalia will take the prime pickings from Orizonia’s retail and wholesale brands respectively. In the next day or two I’ll be back to my positive-thinking self and I’ll share here some views of how all this will affect the outbound business in the short and medium term. Tonight however my thoughts are only for the nearly 5000 professionals of the Orizonia group and their families.